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Azinor Catalyst hits again at Agar-Plantain

The prospect could have recoverable reserves of up to 50mn barrels

UK independent Azinor Catalyst enjoyed double success last November with appraisal and side-track wells at its Azar-Plantain discovery in the northern North Sea, both hitting oil. The firm estimates that the prospect-which is close to the Bruce field operated by fellow independent Serica—could have recoverable reserves in a range of 15-50mn bl of oil equivalent.

Azinor Catalyst is backed by Bermuda headquartered private equity (PE) firm Seacrest Capital, which is also the backer of Norwegian continental shelf (NCS) producer Okea, the first of the recent wave of PE-backed North Sea E&P companies to announce a firm intention to pursue an initial public offering. In September, it announced plans to raise $13mn in a placement and list on the Oslo stock exchange within 12 months.

Okea spent $535mn buying Shell's stakes in the Draugen and Gjoa NCS fields this year. Gjoa has substantial sub-surface upside and several committed and expected tie-ins, according to Okea, while Draugen, the first ever Norwegian Sea development, may require the firm to utilise some of the same skills that saw it move the Yme field from decommissioning to redevelopment to extend the field's life.

But the progress of another Seacrest-backed NCS player, Fortis, seems to have stalled. According to data from the Norwegian Petroleum Directorate (NPD), the firm held 12 NCS licences at the start of this year but transferred out of its interest in four of them in February and the remaining eight in April, leaving it without any Norwegian assets. Seacrest also has E&P interests in Latin America, Asia-Pacific, Namibia and Ireland.

Azinor Catalyst is one of the more exploration-centric of the PE-backed firms on the UK continental shelf (UKCS), in contrast to other explorers attracted to the NCS, where Norway allows companies to deduct 78pc of their exploration costs from taxable income and where, since 2005, companies without taxable income have been reimbursed to the value of this benefit directly in cash.

But the firm's managing director Nick Terrell is adamant that UKCS exploration remains attractive. "We see a lot of remaining potential in the UKCS, in line with the Oil and Gas Authority's recently published re-evaluation of the UKCS's yet-to-find potential. There has also been a high level of interest in the recent 31st UK licencing round. Additionally, the UK fiscal regime rewards success and is very globally competitive on a post-tax $/bl basis. If you are after a material return on capital, then the UKCS is the place to be," he says.

Like many of the PE-backed firms, Terrell sees value in a sharp focus. "Focus drives efficiency and is key to extracting value from a mature basin such as the North Sea," he says. He points to Azinor Capital using forensic quantitative geoscience to identify the best investment opportunities as a good example of this focus, as well as the firm's detailed understanding of the local industry and regulatory regime. "Azinor Catalyst fits the PE model in that we are low cost, nimble and technology-driven," says Terrell.

And the firm's chief is also not worrying about his investor's exit any time soon. "Whilst it is obviously the nature of private equity to seek to capitalise on investments at a certain point in time, this is not a current priority, and Seacrest typically has a longer investment cycle than the traditional PE firm," he says. "In partnership with Seacrest we remain focused on unlocking value from our assets and, when the time comes, we will evaluate a range of potential strategic options."

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